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I think the market may be looking at today's tanker movements without asking what actually changed.

China stepped back when prices spiked because it wasn't going to compete for expensive crude if discounted barrels and inventories were available. At the same time, existing bypass routes around Hormuz were utilised more heavily and emergency stocks filled much of the gap.

Now the market sees Iranian barrels becoming easier to sell, more tankers leaving the Gulf and OPEC bringing supply back, so the conclusion is "oil glut."

But how much of that is genuinely new supply? Iran wasn't exporting zero before sanctions were eased, and China won't avoid imports forever if prices remain reasonable. Once refiners are comfortable on price again and inventories need topping up, demand could recover much faster than today's sentiment implies.

I think there probably was some demand damage, particularly from China. They're very price sensitive and have every incentive to maximise purchases of discounted Iranian and Russian barrels rather than paying $90-100 for benchmark crude.

What I'm less convinced by is the market now swinging to the opposite extreme and pricing a lasting glut. A lot of the shock was absorbed through inventory draws and alternative supply routes. If inventories need rebuilding over time, that's future demand that isn't immediately obvious.

So I can see why the market has become bearish, but it may also be underestimating how much of the adjustment was temporary rather than structural.

Feels like the market has gone from pricing in WW3 to pricing in permanent peace in the space of a week.

The talks are clearly still alive, but so are the military exchanges. That tells me neither side wants a wider war, but neither wants to look weak either.

To me this isn't peace, it's a very uneasy standoff.

The interesting bit is oil. There are a lot of shorts in the market now and if that's true, it won't take much to catch people on the wrong side. You don't need Hormuz to close, just enough uncertainty for sentiment to change.

Maybe everything calms down and oil drifts lower. That's possible. But I'm not convinced the market is pricing much risk anymore, and given what's happened over the last few days that feels a bit complacent.

It's remarkable how quickly markets move from certainty in one direction to certainty in the other.

Last week everyone was discussing how high oil could go.

This week everyone is discussing how low it could go.

As for EnQuest, the timing was almost comical. They announce the biggest deal in the company's history and 24 hours later the market decides to focus on lower oil prices.

Mind you, with a rather large payday heading my way soon, perhaps I should be grateful for the pullback. A week ago I was worried I'd missed the boat.

On a side note, is Cobas running an intern programme these days? They seemed to sell most of the position only to start buying it back again.

Either someone is having a change of heart, or swing trading has become their new modus operandi.

Many seems focused on what the acquired assets are worth.

I'm more interested in what they say about management.

For years the criticism was that EnQuest was trapped by debt, EPL and legacy liabilities.

Then in the space of a few months they refinance the RBL, refinance the bonds, settle Magnus and announce the largest acquisition in the company's history.

At some point the discussion stops being about the assets and starts being about whether the market is still valuing the wrong company.

Today is a day of celebration for most of us and the more I look at this deal, the more impressive it becomes.

EnQuest is adding 57.4 kboepd of production, 138 MMboe of 2P reserves and 208 MMboe of 2C resources. Group production goes from around 43 kboepd to over 100 kboepd and EBITDA moves to more than $900m based on 2025 numbers.

Normally when you see that sort of growth, leverage gets stretched and shareholders spend years hoping the synergies eventually arrive.

Instead, EnQuest is saying net debt to EBITDA would only have moved from 0.9x to 1.1x.

What also stands out is the quality of the assets. Average opex for the acquired interests is around $10/boe and remaining 2P life-of-field capex is only around $170m.

For an $833m maximum consideration package, those are pretty striking numbers.

There's still completion risk and integration risk but on first principles this looks like one of the strongest acquisitions EnQuest has ever executed.

Finally.

For months we've been talking about what EnQuest might do. Today we got a proper answer.

While everyone was debating BP packages and North Sea consolidation, EnQuest went and doubled down on Malaysia.

First impressions are very positive. A lot more production, a lot more reserves, lower group opex and, importantly, leverage still looks sensible.

What I like most is that it feels strategic. This isn't buying barrels for the sake of buying barrels. It shifts the company further towards South East Asia, where EnQuest already knows the assets, the regulator and the operating environment.

Still a lot to read through, particularly the PSC economics and cash flow profile, but this looks like the sort of deal management has been hinting at for quite some time.

The AGM statement makes a lot more sense now.

A very interesting CMD from Serica today.

What stood out to me wasn't really the production targets or even the dividend policy. It was the fact they're sitting there talking about drilling campaigns, new developments, M&A and being debt free within months while operating under the same UK fiscal regime everyone keeps telling us has killed the basin.

That doesn't mean Serica and Enq are directly comparable. Serica has a cleaner balance sheet, lower financing costs and fewer legacy liabilities to carry around. Fair enough.

But it does make me question how much of Enq's discount is really about EPL and how much is about trust. The market seems perfectly willing to back a UK producer when it can see a clear path from production to cash flow to shareholder returns. For me that's the more interesting takeaway. The UK isn't attracting premium valuations, but neither is it being valued at zero. Serica is proof of that.

The question for Enq isn't whether the UK is investable. It's whether management can convince the market that the cash generation and debt reduction story is finally becoming visible.

I agree that this government looks finished.

The North Sea row is one thing, but then you read the Mandelson stuff and half the government seems to be criticising the other half behind closed doors.

Not exactly the sign of a government that knows where it's going.

Usually when this sort of thing starts leaking out, the real problems are bigger than what makes the papers.

Blair is circling this government again.

Whatever people think of him, he can clearly smell the problem. Labour won power, then somehow decided growth would come from taxing work, annoying business, blocking North Sea activity and hoping AI saves the day.

Good luck with that.

The North Sea bit is always the giveaway. They don’t really want to admit they still need it, but they do. They need the jobs, the tax, the gas, the barrels and the security. They just don’t want to be seen saying it out loud.

Interesting development.

Agree Stevo. $100 oil is useful, but too high for too long usually creates its own cure.

Also agree the lack of update is frustrating. Market needs clearer FCF/debt visibility, not more guessing.

That said, I’m not sure silence means bad news. With Brent moving, SOH risk, hedges, Vietnam and working capital timing, they may just not want to put out numbers that are stale almost immediately.

But yes, Enq would benefit from showing the cash flow more clearly rather than making investors infer it.

Interesting and funny story but also slightly scary at the same time 😄

AI really is posing some genuine ethical and philosophical questions for our generation and probably even more for the next one. My view is that every major technological shift creates scepticism early on. We asked similar questions around the train, aeroplane, computers and internet initially.

Personally I do not think AI necessarily leads us to some dark place. I think it has enormous potential if used correctly. The risks are probably more subtle: resonance chambers, shorter attention spans and people outsourcing too much thinking without questioning the output.

But for people who actually challenge what AI writes, think critically about where information comes from and use it more as a cognitive tool than a replacement for thought, it can be extremely powerful.

Honestly even for people without formal education it can still be a huge net positive because it enhances access to information and improves baseline cognition.

At the end of the day, in almost any field, I would probably rather have someone using AI intelligently than someone not using it at all.

Fair comment Romaron. I do use AI sometimes to help organise thoughts or tighten wording, especially on longer macro posts.

But the underlying views and framework are still mine. Probably a fair criticism though that some posts became a bit over-structured over time.

Https://www.theguardian.com/commentisfree/2026/may/22/the-guardian-view-on-britains-coming-energy-shock-mini-measures-wont-suffice

And what makes the Guardian editorial interesting is not what it says about the transition. It is what it accidentally admits about the present.

The piece openly acknowledges that Britain remains highly exposed to imported energy shocks, that refining capacity has collapsed, that electrification takes years, that winter demand spikes remain structurally important and that markets punish political incoherence above almost everything else.

That is already most of the industry argument.

Because once you accept those realities, the debate changes. The question is no longer whether the UK will still consume hydrocarbons during transition. It clearly will.

The real question becomes whether Britain wants to retain domestic productive capability during that transition or progressively outsource more of its energy dependency abroad while dismantling parts of the system that still underpin energy security, tax revenues and industrial capacity.

The irony is that the article simultaneously argues Britain needs resilience while supporting policies that discourage long-cycle domestic investment and weaken basin confidence.

That tension matters because transitions are not built in headlines. They are built through capital allocation, infrastructure continuity, supply chains and regulatory visibility over decades.

And markets have started pricing that inconsistency.

The North Sea is no longer being valued simply on commodity exposure. It is increasingly being valued through the lens of political risk, fiscal instability and infrastructure scarcity.

Ironically, the harder future development becomes, the more strategically relevant existing infrastructure and incumbent operators may become.

As ever, energy systems care less about narratives than physical reality.

A lot of discussion today about “missing numbers”, but I suspect people are misunderstanding what today actually was.

This was not a trading statement or HY release. It was an AGM CEO statement. The purpose was strategic messaging, not publishing a mini-quarterly.

And honestly, the absence of detailed numbers may itself tell you something.

If management wanted to dampen expectations, defend liquidity or explain deterioration, they likely would have needed harder financial framing. Instead the entire tone was:

operational confidence,

balance sheet strength,

growth opportunities,

transactional activity,

and shareholder returns.

They reiterated guidance despite the Ninian outage.

They increased the dividend.

They openly discussed acquisitions.

They highlighted lower financing costs.

They emphasised the value of tax assets in the current oil environment.

They repeatedly framed the company around future growth rather than survival.

That is not the language of a management team trying to quietly hide stress.

The market already knows oil has moved dramatically higher since FY results. The more important question now is not whether Q2 cash flow improved. It almost certainly has.

The real question is whether this becomes:

a temporary geopolitical spike,

or the start of a structurally tighter energy market.

Because if it is the latter, today’s valuation still looks anchored to old EnQuest assumptions while management increasingly sounds like a company entering a very different phase.

Badenoch's question at PMQs yesterday was the right one. Why is oil from Russia acceptable, but oil from Aberdeen is not? Starmer's answer was that the short-term licences are a standard phasing mechanism. Technically accurate. Strategically evasive.

The sequencing is what matters. The Commons voted down new North Sea drilling licences in the morning. Hours later the Russian oil waiver came into force. A live Hormuz disruption already underway, supply tightening globally, and the government chose on the same day to foreclose domestic production while quietly maintaining Russian access. That's not a sanctions policy. That's an energy policy with a press release attached.

The Norway comparison never got mentioned and should have. Britain imports Norwegian gas from the same geological formations, under broadly similar environmental conditions, by some of the same operators. The carbon argument for blocking UK licences while buying Norwegian production isn't a principled position. It's accounting fiction.

The analytical problem is what comes next. North Sea decline runs at roughly 5 to 8 percent annually without new investment. No new licences makes that structural and irreversible within this parliament. Capital is already leaving. Infrastructure gets decommissioned. Skills migrate. These are not decisions that reverse on a five year electoral cycle.

The import dependency that follows is effectively permanent. Britain will be price-taking on Norwegian gas, Qatari LNG and third-country routed Russian barrels for the foreseeable future, with no domestic buffer. When the next supply shock arrives, and they arrive with regularity, the optionality will simply no longer exist.

Both parties own the underlying problem. The Conservatives introduced the windfall tax. Labour extended and deepened it. The geology was indifferent throughout.

The consequences of yesterday's vote will outlast the parliament that made it.

How I see it..

So the interesting thing about this debate is that almost everyone involved now implicitly accepts the same underlying reality: the UK will still need oil and gas for decades.

Which means the real argument is no longer about demand. It is about where supply comes from, who captures the economic value and whether the UK keeps any meaningful industrial capability during the transition.

That is why the phrase “Energy Independence Bill” feels politically powerful but economically contradictory.

Because if domestic demand remains while domestic supply is progressively constrained, the likely outcome is not independence. It is rising import dependence combined with declining domestic productive capacity.

And history usually does not reward systems that deliberately weaken strategic capability while remaining dependent on the underlying commodity.

The other thing markets may eventually realise is that political hostility toward new long-cycle investment can unintentionally increase the value of existing infrastructure and operators already inside the basin.

Majors simplify because political risk rises. Capital becomes selective because regulatory visibility weakens. Infrastructure becomes harder to replace because future development slows.

That tends to increase the strategic importance of specialist late-life operators rather than reduce it.

Which is why the long-term outcome of these policies may end up looking very different from the original political narrative surrounding them.

Interesting watching Labour’s post-election reaction.

One faction says voters left because Labour wasn’t radical enough. Another says communication failed. A third thinks the party lost touch culturally and economically with working-class voters.

But the deeper issue may be simpler: voters stopped believing Labour materially improves everyday life.

That’s the dangerous phase for any governing party because once MPs start believing the electorate has emotionally detached from them, panic spreads rapidly. Politicians ultimately fear extinction more than ideology.

You can already see it: leadership manoeuvring, factional warfare, ideological repositioning, anonymous briefings and open succession talk barely two years after a landslide.

For UK O&G this matters because weakened leadership usually increases policy volatility. The weaker Starmer becomes internally, the more influence competing factions gain. Markets can tolerate ideology. They dislike uncertainty far more.

Ironically, much of the election backlash seems tied to cost of living, energy costs, weak growth and strained public services. Yet parts of Labour appear ready to answer that with even more ideological conflict inside the party.

That may energise activists. Whether it reassures investors, industry or ordinary households is another matter entirely.

I think the important distinction here is between the paper hedge and the physical barrel.

The swap settles against Brent. The cargo sells in the physical market.

So if Brent is $100, EnQuest pays away the difference between $71.3 and $100 on the hedged barrels. But if physical cargoes are actually clearing at $140 because of market dislocation, shipping risk or regional tightness, that premium may still largely sit with EnQuest rather than the hedge counterparty.

In simple terms:

The hedge caps part of the Brent upside but it does not necessarily cap the physical premium sitting above Brent. So your ~$111 realised logic is directionally reasonable in that scenario.

The real debate is probably not the hedge itself, but how large and sustainable the physical premium actually is.

So..

Strangely quiet on the elections considering they may end up mattering more for UK O&G valuations than a $5 move in Brent.

The interesting part is not who won which council. It is that Labour now looks squeezed from multiple directions at once: energy security, cost of living, industrial competitiveness and net zero politics are all starting to collide.

That does not automatically make the government “pro drilling”.

But it probably increases the odds of pragmatism eventually overriding ideology, especially if capital and production continue drifting elsewhere while Norway quietly compounds value in the same basin.

Markets tend to notice these shifts slowly at first, then all at once.